ConnectOne Bancorp, Inc. Reports First Quarter 2014 Results; Annualized Growth
of 32% in Loan Portfolio Since Year-End
ENGLEWOOD CLIFFS, N.J., April 24, 2014 (GLOBE NEWSWIRE) -- ConnectOne Bancorp,
Inc. (Nasdaq:CNOB) (the "Company" or "ConnectOne"), parent company of
ConnectOne Bank (the "Bank"), today reported net income of $2.6 million, or
$0.50 per diluted share, for the first quarter of 2014, compared with net
income of $2.3 million, or $0.56 per diluted share, for the prior year period.
First quarter 2014 results include $0.7 million in after-tax merger expenses
related to the pending merger-of-equals with Center Bancorp, Inc., announced
during the first quarter of 2014. Excluding merger costs, net income was $3.3
million or $0.63 per diluted share, reflecting a 40.7% increase over net
income for the first quarter of 2013. See Supplemental Information-Non-GAAP
Financial Measures.
Frank Sorrentino III, Chairman and CEO of ConnectOne stated, "We are extremely
pleased with our first quarter 2014 financial performance.During the quarter,
the Company's loan portfolio grew by $93.5 million, reflecting a 32%
annualized growth rate.Net income, excluding merger-related expenses,
increased sequentially, by 15.3% over the fourth quarter of 2013.
Nonperforming assets declined, representing 0.71% of total assets as of March
31, 2014, while our efficiency ratio for the first quarter 2014 improved to
47.7%. Our merger-of-equals transaction remains on track to close either late
in the second quarter or early in the third quarter of 2014."
Earnings
Fully taxable equivalent ("FTE") net interest income for the first quarter of
2014 totaled $11.7 million, an increase of $2.3 million, or 24.7%, from the
year ago period.The increase in net interest income was primarily due to a
33.9% increase in average interest-earning assets, which grew to $1.3 billion
in the first quarter of 2014.This was partially offset by a 28 basis points
contraction in the net interest margin, from 4.01% in the first quarter of
2013 to 3.73% in the first quarter of 2014. Average total loans increased by
35.9% to $1.2 billion in the first quarter of 2014 from the prior year
period.Prepayment fees contributed 10 basis points to the net interest margin
for the first quarter of 2014, and 7 basis points to the net interest margin
for the first quarter of 2013. Management expects net interest income to
continue expanding as a result of solid loan growth, while margin compression
is likely to moderate in future periods as the Company's loan origination mix
changes and the loan portfolio fully re-prices.
Non-interest income represents a relatively small portion of the Bank's total
revenue as management has historically made a strategic decision to
de-emphasize fee income, focusing instead on customer growth and
retention.Non-interest income totaled $0.3 million in each of the first
quarters of 2014 and 2013. Bank owned life insurance ("BOLI") income in 2014
(there was no BOLI outstanding during the first quarter of 2013) was largely
offset by declines in gains on sale of residential mortgage loans.
Non-interest expenses for the first quarter of 2014 increased by $1.9 million
to $6.7 million, from $4.7 million in the prior year period.Non-interest
expenses, excluding merger-related expenses, totaled $5.7 million,
representing a $1.0 million or 21.3% increase from 2013, and was essentially
flat from the linked fourth quarter of 2013.The primary factor contributing
to the increases in total non-interest expenses from last year was salaries
and employee benefits expense, which increased by $0.6 million to $3.1 million
in the first quarter of 2014 from $2.5 million in the first quarter of
2013.The increase was primarily due an increase in the number of full-time
equivalent employees and higher incentive-based compensation. Also
contributing to higher non-interest expenses were increased costs associated
with being a publicly-traded entity, higher professional fees, occupancy costs
and a general increase in other operating expenses related to a significantly
increased volume of business.Management continues to focus on expense
control, balancing its investment in infrastructure with prudent and
sustainable growth.
Income tax expense was $1.5 million for the first quarter of 2014 compared
with $1.6 million for the first quarter of 2013. The effective tax rates were
36.0% and 41.3% for the first quarters of 2014 and 2013, respectively.The
effective tax rate for 2014 reflects a reorganized operating structure
effective October 1, 2013.The Company's effective tax rate is projected to be
approximately 36% in future periods, although it is likely to fluctuate
depending upon future levels of taxable and non-taxable revenue.
Asset Quality
Nonperforming assets, which includes nonaccrual loans and other real estate
owned, totaled $9.7 million at March 31, 2014, down from $10.5 million at
December 31, 2013 and up from $7.9 million at March 31, 2013. Nonperforming
assets as a percent of total assets declined to 0.72% at March 31, 2014 from
0.84% at December 31, 2013 and from 0.79% at March 31, 2013.The allowance for
loan losses was $17.0 million, representing 1.37% of loans receivable and
192.5% of nonaccrual loans at March 31, 2014.At December 31, 2013, the
allowance was $16.0 million representing 1.39% of loans receivable and 174.2%
of nonaccrual loans, and at March 31, 2013 the allowance was $13.6 million
representing 1.51% of loans receivable and 181.9% of nonaccrual loans.The
provision for loan losses was $1.3 million for the first quarter of 2014, $1.4
million for the fourth quarter of 2013, and $0.9 million for the first quarter
2013.The provision for loan losses has remained relatively constant, although
the level is contingent upon many factors including, but not limited to, loan
growth, the Company's historical loss experience, macroeconomic conditions and
reserves required for specific credits. The annualized rate of net loan
charge-offs was 0.08% for the first quarter of 2014, 0.03% for the fourth
quarter of 2013 and 0.25% for the first quarter of 2013.
Financial Condition
At March 31, 2014, the Company's total assets were $1.35 billion, a $104.5
million increase from December 31, 2013. The increase in total assets was
primarily due to a $93.5 million increase, to $1.25 billion, in loans
receivable, an $11.0 million increase, to $45.3 million, in cash and cash
equivalents. The growth in assets was funded by a $61.9 million increase in
deposits, a $39.7 million increase in Federal Home Loan Bank borrowings, and a
$2.6 million increase in retained earnings.
Capital
Stockholders' equity totaled $133.0 million as of March 31, 2014, an increase
of $2.9 million from $130.1 million as of December 31, 2013, primarily due to
the retention of earnings. As of March 31, 2014, the tangible common equity
ratio and tangible book value per share were 9.85% and $25.92,
respectively.As of December 31, 2013, the Company's tangible common equity
ratio and tangible book value per share were 10.45% and $25.43, respectively.
About ConnectOne Bancorp, Inc.
ConnectOne is a New Jersey corporation and a registered bank holding company
pursuant to the Bank Holding Company Act of 1956, as amended, that was formed
in 2008 to serve as the holding company for ConnectOne Bank ("the Bank"). The
Bank is a community-based, full-service New Jersey-chartered commercial bank
that was founded in 2005. The Bank operates from its headquarters located at
301 Sylvan Avenue in the Borough of Englewood Cliffs, Bergen County, New
Jersey, and through its eight other banking offices.
For more information visit https://www.connectonebank.com/.
Additional Information for Stockholders
In connection with the proposed merger, Center Bancorp, Inc. ("Center") has
filed with the Securities and Exchange Commission ("SEC") a Registration
Statement on Form S-4 that includes a joint proxy statement of Center and
ConnectOne and a prospectus of Center, as well as other relevant documents
concerning the proposed transaction.Center and ConnectOne will each mail the
joint proxy statement/prospectus to its stockholders subsequent to the
Registration Statement on Form S-4 being declared effective. SHAREHOLDERS OF
CENTER AND CONNECTONE ARE URGED TO READ CAREFULLY THE REGISTRATION STATEMENT
AND JOINT PROXY STATEMENT/PROSPECTUS REGARDING THE PROPOSED MERGER IN THEIR
ENTIRETY WHEN THEY BECOME AVAILABLE AND ANY OTHER RELEVANT DOCUMENTS FILED
WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS,
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Investors and security
holders may obtain a free copy of the joint proxy statement/prospectus (when
available) and other filings containing information about Center and
ConnectOne at the SEC's website at www.sec.gov. The joint proxy
statement/prospectus (when available) and the other filings may also be
obtained free of charge at Center's website at www.centerbancorp.com under the
tab "Investor Relations," and then under the heading "SEC Filings" or at
ConnectOne's website at www.connectonebank.com under the tab "Investor
Relations," and then under the heading "SEC Filings."
Center, ConnectOne and certain of their respective directors and executive
officers, under the SEC's rules, may be deemed to be participants in the
solicitation of proxies of Center and ConnectOne's shareholders in connection
with the proposed merger. Information regarding the directors and executive
officers of Center and their ownership of Center common stock is set forth in
the proxy statement for Center's 2013 annual meeting of shareholders, as filed
with the SEC on Schedule 14A on April 15, 2013. Information regarding the
directors and executive officers of ConnectOne and their ownership of
ConnectOne common stock is set forth in the proxy statement for ConnectOne's
2013 annual meeting of shareholders, as filed with the SEC on Schedule 14A on
April 8, 2013. Additional information regarding the interests of those
participants and other persons who may be deemed participants in the
transaction may be obtained by reading the joint proxy statement/prospectus
regarding the proposed merger when it becomes available. Free copies of this
document may be obtained as described in the preceding paragraph.
This communication does not constitute an offer to sell or the solicitation of
an offer to buy any securities or a solicitation of any vote or approval, nor
shall there be any sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of such jurisdiction.
Forward-Looking Statements
This news release contains certain forward-looking statements which are based
on certain assumptions and describe future plans, strategies and expectations
of the Company. These forward-looking statements are generally identified by
use of the words "believe," "expect," "intend," "anticipate," "estimate,"
"project," or similar expressions. The Company's ability to predict results or
the actual effect of future plans or strategies is inherently uncertain.
Factors which could have a material adverse effect on the operations of the
Company and its subsidiaries include, but are not limited to, those factors
set forth in Item 1A – Risk Factors of the Company's Annual Report on Form
10-K, as filed with the Securities Exchange Commission, and changes in
interest rates, general economic conditions, legislative/regulatory changes,
monetary and fiscal policies of the U.S. Government, including policies of the
U.S. Treasury and the Federal Reserve Board, the quality or composition of the
loan or investment portfolios, demand for loan products, deposit flows,
competition, demand for financial services in the Company's market area and
accounting principles and guidelines. These risks and uncertainties should be
considered in evaluating forward-looking statements and undue reliance should
not be placed on such statements. The Company does not undertake, and
specifically disclaims any obligation, to publicly release the result of any
revisions which may be made to any forward-looking statements to reflect
events or circumstances after the date of such statements or to reflect the
occurrence of anticipated or unanticipated events.
CONNECTONE BANCORP, INC.
CONSOLIDATED STATEMENTS OF CONDITION
(in thousands, except for share data) March 31, December 31,
2014 2013
(unaudited)
ASSETS
Cash and due from banks $3,005 $2,907
Interest-bearing deposits with banks 42,325 31,459
Cash and cash equivalents 45,330 34,366
Securities available for sale 27,199 27,589
Securities held to maturity, fair value of $943 at 898 1,027
2014 and $1,077 at 2013
Loans held for sale 792 575
Loans receivable 1,245,363 1,151,904
Less: Allowance for loan losses (17,035) (15,979)
Net loans receivable 1,228,328 1,135,925
Investment in restricted stock, at cost 9,411 7,622
Bank premises and equipment, net 7,385 7,526
Accrued interest receivable 4,235 4,102
Other real estate owned 870 1,303
Goodwill 260 260
Bank-owned life insurance 15,334 15,191
Deferred taxes 7,539 7,614
Other assets 142 128
Total assets $1,347,723 $1,243,228
LIABILITIES & STOCKHOLDERS' EQUITY
Liabilities
Deposits
Noninterest-bearing $236,872 $216,804
Interest-bearing 790,884 749,003
Total deposits 1,027,756 965,807
FHLB Borrowings 177,301 137,558
Accrued interest payable 2,836 2,762
Capital lease obligation 3,081 3,107
Other liabilities 3,741 3,866
Total liabilities 1,214,715 1,113,100
Commitments and Contingencies
Stockholders' Equity
Common stock and surplus, no par value; authorized
10,000,000 shares at
March 31, 2014 and December 31, 2013; issued and
outstanding 5,122,047 at
March 31, 2014 and 5,106,455 at December 31, 2013 99,466 99,315
Retained earnings 33,539 30,931
Accumulated other comprehensive income (loss) 3 (118)
Total stockholders' equity 133,008 130,128
Total liabilities and stockholders' equity $1,347,723 $1,243,228
CONNECTONE BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(dollars in thousands, except per share data)
Three Months Ended March 31,
2014 2013
Interest income
Loans receivable, including fees $13,455 $10,696
Securities 227 195
Other interest income 22 21
Total interest income 13,704 10,912
Interest expense
Deposits 1,401 1,146
FHLB borrowings 561 334
Capital lease 47 48
Total interest expense 2,009 1,528
Net interest income 11,695 9,384
Provision for loan losses 1,300 925
Net interest income after provision for loan 10,395 8,459
losses
Non-interest income
Service fees 87 100
Gains on sales of loans 41 83
Income on bank owned life insurance 144 --
Other income 77 76
Total non-interest income 349 259
Non-interest expenses
Salaries and employee benefits 3,091 2,480
Occupancy and equipment 829 729
Professional fees 378 271
Advertising and promotion 99 103
Data processing 517 447
Merger related expenses 923 --
Other expenses 835 711
Total non-interest expenses 6,672 4,741
Income before income tax expense 4,072 3,977
Income tax expense 1,464 1,641
Net income $2,608 $2,336
Earnings per common share:
Basic $0.52 $0.58
Diluted 0.50 0.56
Weighted average common shares outstanding:
Basic 5,035,521 4,055,908
Diluted 5,216,599 4,178,214
CONNECTONE BANCORP, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(dollars in thousands, except per share data)
Three Months Ended
March 31, December 31, March 31,
2014 2013 2013
Performance ratios:
Return on average assets 0.82% 0.93% 0.99%
Return on average stockholders' equity 7.98% 8.73% 9.77%
Net interest margin 3.73% 3.69% 4.01%
Efficiency ratio (1) 47.7% 50.5% 49.2%
As of
March 31, December 31, March 31,
2014 2013 2013
Capital ratios:
Leverage ratio 10.25% 10.74% 12.74%
Risk-based Tier 1 capital ratio 10.96% 11.67% 14.18%
Risk-based total capital ratio 12.20% 13.07% 15.43%
Tangible common equity to tangible assets 9.85% 10.45% 12.15%
(1)
Annualized net loan charge-offs as a % of 0.08% 0.03% 0.25%
average loans
Tangible book value per common share (1) $25.92 $25.43 $24.33
Asset quality:
Nonaccrual loans $8,848 $9,175 $7,498
Other real estate owned 870 1,303 433
Total non-performing assets $9,718 $10,478 $7,931
Performing troubled debt restructured loans $2,925 $2,934 $2,996
Loans past due 90 days and still accruing -- -- --
Nonaccrual loans as a % of loans receivable 0.71% 0.80% 0.83%
Nonperforming assets as a % of total assets 0.72% 0.84% 0.79%
Allowance for loan losses as a % of loans 1.37% 1.39% 1.51%
receivable
Allowance for loan losses as a % of 192.5% 174.2% 181.9%
nonaccrual loans
(1) See Supplemental Information - Non-GAAP Financial Measures on following
page.
CONNECTONE BANCORP, INC.
SUPPLEMENTAL INFORMATION - NON-GAAP
FINANCIAL MEASURES
(dollars in thousands, except per share
data)
Three Months Ended
March 31, December 31, March 31,
2014 2013 2013
Efficiency Ratio
Non-interest expense $6,672 $5,765 $4,741
Less: merger related expenses (923) -- --
Adjusted non-interest expense $5,749 $5,765 $4,741
(numerator)
Net interest income 11,695 11,067 9,384
Non-interest income 349 349 259
Less: gains on sales of securities -- -- --
Adjusted operating revenue $12,044 $11,416 $9,643
(denominator)
Efficiency Ratio 47.7% 50.5% 49.2%
Diluted EPS excluding merger-related
expenses
Income before income tax expense $4,072 $4,251 $3,977
Income tax expense 1,464 1,401 1,641
Net income 2,608 2,850 2,336
Merger related expenses 923 -- --
Income tax benefit 245 -- --
Merger related expenses (after tax) 678 -- --
Net income excluding merger related $3,286 $2,850 $2,336
expenses
Diluted shares 5,216,599 5,180,522 4,178,214
Diluted EPS, as reported $0.50 $0.55 $0.56
Diluted EPS, excluding merger related $0.63 $0.55 $0.56
expenses
Return on average assets, as reported 0.82% 0.93% 0.99%
Return on average assets excluding 1.03% 0.93% 0.99%
merger related expenses
Return on average stockholders' equity, 7.98% 8.73% 9.77%
as reported
Return on average stockholders' equity 10.06% 8.73% 9.77%
excluding merger related expenses
As of
March 31, December 31, March 31,
2014 2013 2013
Tangible Common Equity and Tangible
Common Equity/Tangible Assets
Common equity $133,008 $130,128 $122,439
Less: intangible assets (260) (260) (260)
Tangible common equity $132,748 $129,868 $122,179
Total assets $1,347,723 $1,243,228 $1,005,771
Less: intangible assets (260) (260) (260)
Tangible assets $1,347,463 $1,242,968 $1,005,511
Tangible Common Equity/Tangible Assets 9.85% 10.45% 12.15%
Tangible Book Value per Common Share
Book value per common share $25.97 $25.48 $24.38
Less: effects of intangible assets (0.05) (0.05) (0.05)
Tangible Book Value per Common Share $25.92 $25.43 $24.33
CONNECTONE BANCORP,
INC.
NET INTEREST MARGIN
ANALYSIS
(dollars in
thousands)
For the Three Months Ended
March 31, 2014 March 31, 2013
Average Average Average Average
Interest-earning Balance Interest Rate Balance Interest Rate
assets: (7) (7)
Investment $37,122 $233 2.55% $25,216 $195 3.14%
securities (1) (2)
Loans receivable 1,186,847 13,455 4.60% 873,557 10,696 4.97%
(3) (4)
Federal funds sold
and interest-
bearing deposits 48,463 22 0.18% 51,431 21 0.17%
with banks
Total
interest-earning 1,272,432 13,710 4.37% 950,204 10,912 4.66%
assets
Allowance for loan (16,450) (13,545)
losses
Non-interest 37,977 19,364
earning assets
Total assets $1,293,959 $956,023
Interest-bearing
liabilities:
Savings, NOW, Money
Market, Interest $340,125 225 0.27% $329,906 259 0.32%
Checking
Time deposits 436,820 1,176 1.09% 277,882 887 1.29%
Total
interest-bearing 776,945 1,401 0.73% 607,788 1,146 0.76%
deposits
Borrowings 166,226 561 1.37% 76,019 334 1.78%
Capital lease 3,098 47 6.15% 3,172 48 6.14%
obligation
Total
interest-bearing 946,269 2,009 0.86% 686,979 1,528 0.90%
liabilities
Noninterest-bearing 209,303 164,403
deposits
Other liabilities 5,897 7,706
Stockholders' 132,490 96,935
equity
Total liabilities
and stockholders' $1,293,959 $956,023
equity
Net interest
income/interest
rate spread (5) $11,701 3.51% $9,384 3.76%
Tax equivalent (6) --
effect
Net interest income $11,695 $9,384
as reported
Net interest margin 3.73% 4.01%
(6)
(1) Average balances are calculated on amortized cost.
(2) Interest income is presented on a tax equivalent basis using 35 percent
federal tax rate.
(3) Includes loan fee income.
(4) Loans receivable include non-accrual loans.
(5) Represents difference between the average yield on interest earning assets
and the average cost of interest bearing liabilities and is presented on a
fully tax equivalent basis.
(6) Represents net interest income divided by average total interest-earning
assets.
(7) Rates are annualized.
CONTACT: Investor Contact:
William S. Burns
Executive VP & CFO
201.816.4474; bburns@cnob.com
Media Contact:
Rachel Gerber, MWW
646.215.6889; rgerber@mww.com